What to Know About The U.S.-China Trade War Truce

The 25 percent tariff on imported Chinese goods won't be going into effect on Jan. 1, 2019, as promised, but the home design industry isn't out of the woods just yet. Here's what retailers and designers should be watching right now.

Alison Martin

12/04/2018

Last weekend, the U.S. and China came to a truce in the ongoing trade war, alleviating (for now) one of the biggest economic concerns for both retailers and designers coming in 2019: the 25 percent tariff on imported Chinese products.

During a two-and-a-half hour dinner at the Group of 20 Summit in Argentina, U.S. President Trump and President Xi Jinping agreed to extend trade talks between the two countries for 90 days. The U.S. will not enforce the 25 percent tariff previously scheduled to go into effect on Jan. 1, 2019, which includes would affect a long list of furniture and lighting products, and China has agreed to lower tariffs on imported American cars and buy more American products, though specifics have not been released.

"Home Furnishings Association is pleased that tariffs on furniture imported from China won't be increased on January 1, 2019," said Sharron Bradley, CEO of HFA, in an emailed statement. "We hope that during the next 90 days the Chinese will agree to reform their trade practices and it will be possible to drop all tariffs."

"While ALA is encouraged by the agreement and President Trump’s willingness to not increase tariffs to 25 percent," said Michael Weems, Vice President, Government Engagement at the American Lighting Assn. (ALA), in a prepared statement, "the negotiations taking place over the next 90 days will be a true test to establishing a robust U.S./Chinese trade policy."

“We commend President Trump for his efforts to restore a fair and balanced trade relationship with China," said the National Retail Federation's President and CEO Matthew Shay in a prepared statement. "The administration’s decision to give diplomacy a chance and at least temporarily avoid the imposition of increased and additional tariffs is an encouraging sign. It is clear the administration has heard the voices of those negatively impacted by existing tariffs. We hope this 90-day tariff pause will lead to a positive resolution that removes tariffs altogether and improves U.S.-China trade relations. Retailers are pleased by this progress.”

The news of the ceasefire broke over the weekend, and there have already been some updates and clarifications. Here's what's happened since the news first dropped and what to do for the next 80-some days.

New trade developments

It is not entirely clear about the U.S. or China actually promised to do outside of suspending the 25 percent tariff for 90 days and continuing to negotiate. On Air Force One leaving Argentina, Trump told reporters that China would be buying more U.S. agricultural products and dropping its 40 percent tariff on U.S. automobiles.

Trump warned China via Twitter on Tuesday that he is a "Tariff Man" and will enact the 25 percent tariff if no agreement is reached within the 90-day period. In the same tweet, he also claimed the U.S. was taking in billions from tariffs, which an NBC fact checker found to be true, but the statement doesn't take the retaliatory tariffs placed on American steel products from other countries into account, which affect that bottom line.

On Tuesday, China announced new punishments and restrictions on companies that engage in intellectual-property theft, including restricting "companies’ access to borrowing and state-funding support," according to Bloomberg. If enacted, these laws would go along way in preventing intellectual property theft, one of the main goals for U.S.

So all this to say: Will an agreement be reached? Hopefully yes. Another delay on the 25 percent tariff could come down and extend talks again. There is, of course, always the chance that the deal will fall through, and the 25 percent tariff will go into effect. At this point, there's no definite answer one way or the other.

So what now?

While this is all good news heading into market season, a formal agreement has not been reached yet, so it is still too early for celebration — or despair for that matter. The truce essentially puts the industry right back where it was during High Point Market, where many asked: "What can I do right now?"

The answer, unfortunately, is not much. Retailers and designers should continue to keep up with news on trade talks, and they should be preparing for the worst. At market next month, talks about tariffs should be taking place, and no one should leave a showroom without knowing how that manufacturer plans to handle tariffs (we can help you there). Knowing their plans will help you make your plans should the worst happen.

Readers, share with us: How are you feeling about the U.S.-China trade war right now? Share your thoughts with us in the comments.